Whistleblowers

Who they are and how management should respond.

What type of employee becomes a whistleblower? What type of company culture promotes whistleblowers? How should the company respond once a whistleblower steps forward? Can a silent employee be just as damaging as an employee who speaks out? These are relevant questions with serious consequences in today’s business climate.

In 2003, Time magazine put a new twist on their “Person of the Year” issue. That year there were three selected, and they were all whistleblowers.[1] If the first half-decade of the 21st century could be characterized, we might describe it as the whistleblower era. For the first time in history, whistleblowers are being recognized as a powerful and positive force for change[2] with new laws protecting the rights of whistleblowers.[3] However, even when the law is not involved, managers are finding it in their best interests to understand who whistleblowers are and what response they need. The kind of culture the company has and the ways in which managers interact with whistleblowers will determine if their disclosures work to the advantage of the organization.

Who Whistleblowers Are

Who are the typical whistleblowers and why do they do it? Contrary to their media image as disgruntled marginal employees,[4] most whistleblowers are among the best employees in the organization.[5] Evidence indicates that whistleblowers are highly altruistic.[6] Many whistleblowers have been on the job for years, are highly respected, and are considered by their managers to be successful and loyal employees.[7] It is precisely this loyalty and the whistleblowers’ desire to do what is altruistically right that motivates them to speak out when they observe a situation that is illegal, unethical, or potentially damaging to the company, employees, and/or community.[8] In an effort to prevent further harm they make the decision to disclose information about wrongdoing.[9] In general, whistleblowers do not arrive at this decision lightly.[10]

We exclude from this discussion of whistleblowers those engaged in qui tam lawsuits. These lawsuits are filed by individuals in the name of the U.S. government in order to recover money that was misappropriated from the government, and in which the individual shares in the proceeds of the recovery. In my experience and estimation, the motivation behind such suits differs from that motivating other whistleblower actions and is not necessarily or even usually an organizational development issue (Tavakolian, 1993). We also exclude discussion of the untruthful whistleblower with ulterior motives.

It is estimated that only 30 percent of employees who discover wrongdoing or potentially dangerous conditions ever disclose them.[11] The other 70 percent become silent observers, never revealing what they have learned and thus allowing the damaging, often costly conditions to persist. Such inaction is possibly due to a lack of empathy for the victims, to a diminished perception of wrongness, or to a fear of retaliation.[12]

In general, whistleblowers have enough trust in management and in the ethics of their organization to come forward and report their observations internally.[13] Often this naiveté is promoted by managers who withhold their true feelings about the disclosure and the whistleblower him/herself.[14] In the end, as in the case of the Time magazine persons of the year, whistleblowers discover that the organization is hostile to them and to their disclosures. As Nick Perry puts it, “Whistleblowing might well be classified…as a form of occupational suicide ….”[15] What lies in store for whistleblowers is what is known as whistleblower retaliation, a constellation of activities by management aimed at neutralizing the whistleblower.

Alford suggests that the reason that retaliation is so pervasive is that it represents an intrusion into the personal values of home and community into the company. That intrusion poses a threat to the often opposing values of the company.[16] “It is what every organization most fears: that someone inside represents the interests of outside….”[17] The whistleblower is sacrificed to prevent the contamination of organizational culture by ethical concerns that might thwart organizational objectives. Through retaliation, the whistleblower is neutralized, and the stability and security of the organization and the people in power are assured.[18]

Helpful or Harmful?

Whistleblowing can be helpful to the company or harmful. When the company encourages people to speak out and when employees trust their managers to be fair, potential whistleblowers are more likely to report potentially damaging situations internally rather than going outside of the company.[19] When internal reporting occurs, companies then have the option to deal with the situation on their own terms and in their own time. Internal disclosures can also make the company aware of potentially damaging conditions before they become a crisis. Finally, internal whistleblowing handled in an ethical and compassionate way by managers signals other employees that it is safe for them, too, to become the eyes and ears of the company.

On the other hand, if employees do not feel safe in speaking out within their company, they are likely to seek remedies outside the organization.[20] Such remedies include taking their complaints to government agencies or the media, or pursuing legal alternatives that can in themselves result in huge losses.[21] The recent Wal-Mart sex discrimination class action lawsuit, for example, has the potential of costing over a billion dollars in awards.[22] And in addition to the obvious out-of-pocket expenses attached to external disclosures, there are additional less visible but no less devastating effects, including stalled stock prices,[23] factionalization of the organization,[24] and the ramifications of union intervention.[25]

Amazingly, retaliation against whistleblowers seems fairly standardized across industries and organizations. Dworkin and Baucus suggest that it most commonly falls into four categories: nullification, in which managers seek to neutralize whistleblowers and their information through intimidation; isolation, in which access to information and resources is taken away from the whistleblower; defamation, through which whistleblowers’ reputations, qualifications, and even sanity are called into question, and finally, expulsion, when the employer finally forces the whistleblower out through firing or forced resignation.[26] In some cases whistleblowers have been expelled from an entire industry through blacklisting.[27]

Costs of Retaliation

The cost to an organization for mishandling a whistleblowing situation can be substantial. Aside from the employer’s legal costs including fees, lawsuits, fines, and settlements that can run into the millions of dollars new laws protecting whistleblowers make employers potentially liable for the whistleblower’s back pay and legal costs.[28] Civil penalties in the healthcare industry can be as high as $25,000 per incidence of retaliation.[29]

Photo: Christian Sherra

In addition, as of a 1997 Supreme Court ruling, it is considered retaliation and illegal for an employer to interfere with the ability of a former employee who blew the whistle to find new work.[30] And if we consider the added cost of increased stress in the workplace brought about by punitive management and lack of trust when workers observe retaliation, the costs to organizations become enormous.[31] When whistleblowers are punished in any way for their disclosures, other employees learn that it is not safe to tell the truth. In the future, they become less willing to admit mistakes or disclose even serious, costly problems.[32] As word gets out and trust is breached, performance company-wide is compromised, and employees will be more likely to take their grievances outside the company.[33]

On the other hand, organizations can create an environment in which employees feel safe in coming forth internally with problematic information. In order to do this, the organization needs to create a culture in which bad news is welcomed, employees trust their leadership enough to speak openly and honestly about what they see, and personal interests of managers take a back seat to the well-being of the company.[34]

Planning a Response

While keeping a cool head in the wake of threatening disclosures is not an easy thing for managers to do, organizations that have a plan for handling a crisis and that stick to their plan fare far better in crisis than companies that do not.[35] Having a plan for handling whistleblowing situations is a way of making sure that managers make the right decisions even under the inevitable pressure of an ensuing crisis. With a policy in place, the response of management is based on the thoughtful consideration of long- and short-term consequences rather than on a reaction born out of the need to prevent embarrassment to a few.[36] In addition, since employees can have the feeling of being psychologically retaliated against even if no overt negative actions are taken against them,[37] it pays to have a plan that focuses primarily on the needs and well-being of employees[38] rather than on legal and company needs.

Such a whistleblowing plan must first be grounded in an organizational culture based on mutual trust between management and employees,[39] in which individuals take responsibility for communicating problems to management before those problems get out of hand and in which managers take responsibility for both the honest investigation of allegations and for the proper treatment of informers.[40] Organizations that take a positive approach to whistleblowing find that such difficult times are priceless opportunities to solidify commitment in the workforce by building trust and a sense of collaboration.

A good whistleblowing plan has two phases: The first, “context,” creates a culture of ethics, trust, and responsibility that promotes internal employee disclosure. The second, “what to do,” is the established process that managers can follow when the disclosures are made to them by employees.

Culture

1. Know what you want. The very first item on the agenda for organizational policy makers is to answer the question, “Do we really want employee disclosures?” While it is tempting to emphatically and immediately answer, “Yes,” in reality most companies have built-in mechanisms to suppress both the information and the informers.[41] Managers must be reflective and proactive in answering that question. At stake is nothing short of their relationship with employees. To promise employees a fair and safe hearing when they make disclosures and not to fulfill that promise is far more damaging to employee trust and loyalty in the long-run than never to have made the promise at all.[42]

2. Create official policies that promote integrity and internal whistleblowing. Official company policies are an important way of telling employees exactly how the company stands on a given matter. Since fear of retaliation and the belief that the company will do nothing about the disclosure are two important reasons that employees either do not disclose wrongdoing or else disclose it externally, company policy should specifically cover these two areas. Policy should make it clear that 1) illegal, unethical, unsafe, or otherwise damaging practices on the part of the company or company employees are not tolerated; 2) employees are encouraged to disclose wrongdoing and that there are appropriate channels available for such disclosures; 3) employees who disclose unwanted practices will be protected from retaliation, and 4) allegations will be honestly and thoroughly investigated.

3. Walk the talk. Ways in which the policies protecting whistleblowers against retaliation are carried out will make a difference in how and if employees make disclosures in the future.[43] Since one of the great trust destroyers in a company is a policy that is not uniformly and consistently carried out,[44] affirming a culture of trust requires that official policies be upheld and enforced consistently. This means that policies be applied consistently every time and uniformly to all employees regardless of status from line supervisors to the CEO.

4. Reward desirable behavior. Most employees who observe undesirable behavior never disclose it to managers. When employees are encouraged to disclose wrongdoing internally, they should be rewarded for having the courage to do so. A good whistleblowing plan will specify in advance appropriate ways for managers to handle the problem. Rewarding internal whistleblowers will signal other employees that it is safe and desirable to disclose internally. Rewards for desirable behavior can be as simple as just acknowledging the employee orally for coming forward or a gift certificate for two for a movie. What’s important is that employees see that their courage is appreciated, their contribution is valued, and that someone noticed and cared.

What to Do When Whistleblowing Occurs

1. Adhere to the plan. Disclosures of wrongdoing can be enormously stressful for all involved. Managers should understand that the purpose of a crisis plan is to minimize the chances of their making damaging decisions at a time when it might be difficult for them even to think clearly.[45] Managers should be primed to adhere to the plan regardless of their own discomfort or opposition from those who might stand to lose by the disclosures.

2. Listen. Managers should listen to complaints or disclosures with respect and with friendliness, giving the whistleblower their full attention. This is no time to defend, deny, disagree, or argue. And above all, it is no time for lies or promises. This is a time for gathering information and building rapport.

3. Respond. While the tendency might be to ignore the problem in the hope that it will go away, history dictates the need to assume that the issue is there to stay and ripen, and therefore to respond quickly and positively by conducting a thorough investigation.[46] A genuine, thoughtful investigation does two important things: 1) it uncovers new information and exposes real and potentially damaging situations before they cause greater damage and 2) it demonstrates that disclosures are taken seriously, so other employees will be more likely to speak up in the future. It’s important for managers to know that they have no obligation to reveal the nature or findings of their investigation, but since even the appearance of a cover-up could breach the trust between managers and employees and could lead to future legal problems, managers must be as forthright as possible.

Conclusion

The realization by managers that whistleblowers are not only valued employees, but that they also perform a beneficial function for the company is the first step to creating positive outcomes from disclosures of wrongdoing. However, such realization is not the only step. It must be followed by action that validates the company’s commitment to integrity. Above all, there must be no attempts to invalidate or silence the whistleblower or to retaliate in any way. By the time management gets the bad news, chances are good that the information will already have spread among other employees. All eyes will be silently on management to see how they handle the situation. If employees perceive that the whistleblower is being punished for speaking up, they will lose trust in company management and will infer that in this company it is not safe to take a stand. Consequently, in the future employees will be less likely to bring problems to the attention of management. By partnering with whistleblowers through use of a good whistleblowing plan, management can discover a powerful ally in building trust and collaboration and in implementing change.

Ariane David, PhD, teaches organizational theory and behavior as part of the adjunct faculty at the Graziadio School. Dr. David is a founding partner of The Veritas Group, a consulting firm that specializes in scientific approaches to organizational development, and she is developer of the Veritas Interpersonal Assessment System, a proprietary process of organizational assessment. Her original research and practical experience in the area of whistleblowing has made her a recognized expert in this field.